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Income Tax Appellate Tribunal, ‘C’ BENCH: CHENNAI
Before: SHRI GEORGE MATHAN & SHRI S. JAYARAMAN
: 02.05.2018 सुनवाई क+ तार"ख/Date of Hearing घोषणा क+ तार"ख / : 02.05.2018 Date of Pronouncement आदेश / O R D E R PER GEORGE MATHAN, JUDICIAL MEMBER:
Revenue against the Order of Commissioner of Income Tax (Appeals)-1, Madurai, in dated 08.05.2017 for the AY 2013-14. 2. Shri Sailendra Mammidi, CIT, represented on behalf of the Revenue and Shri V. Srikrishnan, CA, represented on behalf of the assessee. :- 2 -:
In the Revenue’s appeal, the Revenue has raised the following grounds:
1. The order of the CIT(A) is opposed to law on the facts and in the circumstances of the case.
2. The CIT(A) erred in deleting the addition of Rs.7,54,67,359/- made by the Assessing Officer on the ground that there is no scope for addition as advance by the assessee to its sister concern has been made only as a measure of commercial expediency.
3. The CIT(A) ought to have seen that the total borrowing of the assessee exceeds the reserves and surplus of Rs.46.19 crores evidencing that the borrowed funds were utilized for making interest free advance to the sister concern and the AO has correctly adopted interest at 12% for making disallowance on the ground that the borrowed funds were not incurred wholly and exclusively for the purpose of assessee’s business and hence ought to have sustained the addition made by the Assessing Officer.
4. For these and such other grounds that may be adduced at the time of hearing it is prayed that the order of the CIT(A) may be reversed and that of the Assessing Officer restored.
4. It was submitted by the Ld.DR that the assessee is a company which is doing the business of manufacturing textiles. During the relevant Assessment Year, the assessee had made advances to sister concern, M/s.Sree Iswarya Textiles Mills Pvt. Ltd., to an extent of Rs.53.16 Crs. and for the period from the Assessment Year 2007-08 to 2013-14, the total advances was made to an extent of Rs.114.75 Crs. The assessee’s reserves and surplus was only Rs.46.19 Crs. It was a submission that no interest had been charged. Consequently, the AO had made a disallowance @12% on the advances made to sister concern. It was a submission that the Ld.CIT(A) had deleted the same by accepting the claim of commercial expediency. It was a submission that the order of the Ld.CIT(A) was liable to be reversed. :- 3 -:
5. In reply, the Ld.AR submitted that the advances had been given to M/s.Sree Iswarya Textiles Mills Pvt. Ltd., for the purpose of setting up of Windmill Farm. The assessee had also entered into tri-party agreement with the said sister concern for the use of the power generated by the Wind Farms of M/s.Sree Iswarya Textiles Mills Pvt. Ltd. It was a submission that the purchase of the power helped the assessee in lowering its cost as also in having uninterrupted power supply. It was a submission that there was severe power crisis in Tamil Nadu prior to 2013 and the entire power generated by M/s.Sree Iswarya Textiles Mills Pvt. Ltd., was consumed by the assessee for running the textile mills. It was a submission that the sister concern was a subsidiary and under the control of the assessee company and consequently, the Ld.CIT(A) had rightly deleted the disallowance by applying the principles laid down by the Hon’ble Supreme Court in the case of M/s.SA Builders Ltd., reported in 288 ITR 1. The Ld.AR vehemently supported the order of the Ld.CIT(A).
We have considered the rival submissions.
A perusal of the order of the Ld.CIT(A) clearly shows that the Ld.CIT(A) has taken into consideration the fact of the commercial expediency in respect of providing interest free loans by the assessee to its sister concern. In fact, a perusal of the Assessment Order clearly shows that this issue was also before the AO and in Page No.3 of the Assessment Order, the AO has recognized that the assessee has done a :- 4 -: total value of power purchased from M/s.Sree Iswarya Textiles Mills Pvt. Ltd., from 2006 to 2013 at Rs.53.16 Crs. This being so, clearly the advance has been given only for the purpose of commercial expediency. Further, as the Revenue has not been able to dislodge any of the findings on the fact as arrived by the Ld.CIT(A) in his order, we find no reason to interfere in the same. Consequently, the findings of the Ld.CIT(A) on this issue stands confirmed.
In the result, the appeal filed by the Revenue stands dismissed.
Order pronounced in the Open Court on May 02, 2018, at Chennai. (एस जयरामन) (जॉज" माथन) (S. JAYARAMAN) (GEORGE MATHAN) लेखा सद य/ACCOUNTANT MEMBER "या"यक सद य/JUDICIAL MEMBER